Forum Archive Index - December 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 

 

Hugh,

 

We have got a 'mixed bag', here.

H: I heard that you had a recent health check?

G: The doctor told me:" Gerry, you are 73 years old now, you've got to take it easy, you only have another 30 odd years left!!

H: Oh, that is bad news, how about your blood pressure?

G: 140/70 to 135/70, there has been little change over the years; yes, my blood pressure improves with risk taking!

 

H: One or two adverse comments on your item of Dec 13?

G: Well now, if you can't swim, would you jump into the river, if you were asked to? Obviously, you need to do your homework before any investment! 

That article had some sound advice, I thought. It is also clear that it is impossible to serve every one. One friend even told me that he does a 'dry run' before seriously starting on an investment. 

H: You are not referring to an unpleasant medical condition, are you?

 

What did you think of the US electoral voting? It seems that the result hinges on the vote counter's political conviction. No wonder! His/her future job may well depend on the outcome!

 

G: I think that Alan Greenspan was well aware of a possible sudden heavy fall on the Dow, had he not continued to serve: That fall could have been greater than 10 %!  Another positive factor was that Bush promised a heavy tax cut. We don't want  to discuss the pros and cons of such a cut, suffice to say that  people who have lost on their margin trading will reduce their mortgage.

I have been watching the US GDP data for some time and was shocked to see its growth decline so quickly. That tax cut may  assist somewhat in keeping some spending going but I think that on balance most of the money will be spent on private debt repayments as it is difficult to restore confidence in a short time. Private debt levels are high. 

 

H: There is still room for some further adjustment in the Dow, I think: There could be some flow-on effect on the US dollar as there will be withdrawals by foreigners who have financed a lot of the economic expansion.

 

A lot will depend on the economic cycle in Europe and that is not too even either. If the foreign money 'thinks' that the Euro will rise strongly, then some of it will go there! We need to find the latest predictions about the GDP growth in Europe.

 

Let us hope that any withdrawal will be gradual as the dollar will otherwise have to be defended or interest rates have to rise.

    

Greenspan's job will be a balancing act: To keep up a certain level of spending to maintain a GDP growth which will entice the foreign money to stay there so as  to keep the dollar at a certain level: There are also large trading deficits to finance. Obviously, Bush wants that as well to collect the tax he needs to pay for his promises!

 

G: There is still an escape as well: Foreigners to take over more American businesses. Unfortunately, they have been doing this for quite some time already; finantial 'benefits' of this kind will be limited.

H: Greenspan will try to minimise the fall-out while still maintaining some level of demand. He will  keep an eye on employment/productivity and inflation levels.

 

 

Gerry